From Valuation Advisory to Investment Banking: How to Make the Lateral Leap

Ask around about lateral hiring at investment banks, and you’ll hear a few comments come up repeatedly:

“It’s impossible if you haven’t worked in IB before because they only want people with previous experience.”

“Seriously, who would ever leave their job suddenly in the middle of the year when it’s so hard to get the job in the first place?”

“Banks are just not hiring.” (Regardless of deal activity, the economy, etc.)

Our reader interviewee today proved all of the points above wrong by moving from valuation advisory (similar to what you do at the Big 4) into investment banking, in the middle of the year and without previous IB experience.

Oh, and he was from a non-target school as well.

And he moved from a regional office to NYC in the process.

Here’s exactly how he did all this and moved into investment banking after graduating:

Whither Commercial Banking?

Q: So, your story. Walk us through the beginning and what you did during and after university.

A: Sure. I attended a small, non-target college in the Southern part of the US. I didn’t have much money to spend on attending a brand-name school, and this one had offered me a full academic scholarship so it was hard to pass up.

At my school, almost everyone in the business / finance programs wanted to go into commercial banking afterward. Even my mentor at university was a commercial banker, and he constantly talked about how good it was.

Hardly any firms recruited there for real investment banking positions, so people perceived commercial banking as their “best option.”

Despite that, I wasn’t quite sold on it and I wanted to keep my options open and avoid getting pigeonholed into commercial banking in the future.

So I won an offer for an internship at a boutique valuation advisory firm and worked there in the summer of my junior year.

I liked the work quite a bit and learned a ton about valuation and financial modeling.

But when I got back to school for my final year, I still pursued full-time commercial banking roles for a while because it seemed like the thing to do.

Q: But you didn’t end up working in commercial banking full-time…

A: Nope, because the firm I had interned at gave me an exploding offer and I chose to accept that rather than taking a chance and possibly not ending up with any full-time job offers.

That was probably for the better: it’s much easier to make your case for IB if you’ve done valuation-related work before, but it would be more difficult if you’ve only had commercial banking experience.

Q: And so what was it like working at this firm? It seems like you enjoyed it at first.

A: In some ways it was great, because it really was a crash course on valuation and financial modeling and I got a lot of client exposure from very early on.

So I knew within my first 2 years on the job that I didn’t want to stay there permanently.

Discussion of Strategic Alternatives

Q: So then you started looking for IB roles 2 years into the job?

A: Not exactly. I had very little idea of what investment banking actually was back then.

I really didn’t know which direction I would head in, so I pursued almost anything that seemed related to my work experience – corporate finance, investment banking, private equity, and even joining a valuation / business modeling group at a Big 4 firm.

That turned out to be one of my biggest mistakes – if you interview for so many different roles, it is really hard to keep different versions of your story straight and to sound convincing when you go in to speak with each group.

I did that because I wasn’t 100% sold on banking after doing my own research and networking – so I didn’t want to commit to it and ignore everything else.

But then about 6 months ago, I realized that I wasn’t doing well in interviews because of this exact problem – so I started declining all non-IB interviews, and even stopped pursuing a PE opportunity (the process would have taken too long).

That’s when things started taking off.

I know you’ve recommended keeping all your options open before, but in my experience it was really, really hard to do that and interview for so many different roles when you’re already working full-time.

Q: OK, so you narrowed your focus and then you started doing a lot better.

Can you walk us through how you approached networking once you made that decision?

I spent around 5 hours per week on it over the course of a year, which was split between looking for people on LinkedIn, asking for introductions, and setting up calls.

Besides the obvious benefits of networking (interviews), I gained 2 other important advantages:

I learned how to speak like bankers do – this is a subtle point, but just by using different vocabulary and lingo you can instantly make yourself a better candidate.

I got very direct feedback from bankers – some were brutally honest and said my chances weren’t good, but I always took action based on what they said and fixed holes in my story and work experience based on that.

I relied heavily on a single contact I met during my internship at this valuation advisory firm – he was several years above me and managed to win a boutique IB offer and then a bulge bracket offer several years ago, after completing the same internship I had.

I got to know him well during the internship and stayed in touch afterward, so he was a “mentor” of sorts to me.

Altogether, I probably talked to around 40-50 bankers (most of them were junior, but a few were VPs and above) – I found some of them through LinkedIn, others through alumni, and still others through my mentor and a 2nd person who had worked at my firm and then got into banking.

I had never even met the second guy in-person – I came across his profile on LinkedIn, reached out to him, and said, “Hey, I saw you worked at my current firm and then got into IB, do you have any tips or advice?”

You’ve mentioned before that you should cast your net wide, but I think it’s worth pointing out that a few good, very reliable contacts can be far more helpful than dozens of people you barely know.

In my case, I met 80% of the bankers I networked with through these 2 people.

Q: Yeah, that is a great point. If you already have a really strong connection with someone you need to take full advantage of it.

What about the geographical focus? You were working in the South, but ended up moving to NYC. Did you have to make in-person trips there?

A: Nope, I did almost everything via the phone and email. The first time I even went to NYC in-person was for the interview that eventually led to my job offer.

I focused on a major banking center in the South at first since I knew more people there, but I realized that the turnover rate is much higher in NYC, which is to your advantage when looking for lateral roles – banks often find themselves shorthanded as analysts leave right around bonus season.

Q: You bring up an interesting point about timing – do you think it makes more sense to go for lateral roles when it’s close to bonus season and people are leaving?

A: Actually, not really.

There might be a small advantage to doing this, but in my opinion the sooner the better when you’re recruiting for lateral roles – you don’t want to wait an arbitrary amount of time just because you think people will be leaving right after bonuses.

Although I liked the RE team, I didn’t want to get pigeonholed in that industry so I didn’t go beyond a phone interview with them.

At the other bank (a top 15 global firm), a lot of analysts were leaving early for PE roles so they needed to hire someone very quickly.

I found out about the opportunity at noon on Thursday one week, went through 2 interviews and a case study, flew in for an in-person interview, and won the offer in 7 days.

Q: Yeah, sounds like they really needed the help. So what were the key objections you faced in interviews?

A: First off, as you’ve pointed out before, most bankers tend to view anything other than banking as inferior.

I had assumed they would assault me with technical questions, but my first 2-3 interviews focused on:

Who are you and why do you want to do this?

What does your firm do?

What work have you done that’s relevant to this role?

Are you sure you want to move to NYC? Why?

I anticipated a lot of those in advance and had ready-made responses to the usual questions about the hours, my attention to detail, the relevancy of my work experience, etc.

The short version of my story:

“Everyone at my school did commercial banking, but I was more interested in valuation and financial modeling, so I went to the valuation advisory firm to get exposure to that. While I enjoyed the work, I wanted to take a more active role in the deal process instead of simply coming in to render an opinion after all the work had already been done – and I see IB as the best way to get there because it would allow me to combine my existing valuation and financial modeling skill set with advising companies on deals and taking a more active role in the process.”

I made sure to include keywords such as “attention to detail” in my actual story, and also included specific references to the number of hours I had worked during busy periods at my firm.

I could also cite examples of the valuation work I did that was most relevant to IB.

That way, the interview would turn into more of a “get to know you” session as opposed to a “grill you on whether you’re qualified and serious” session.

The question about whether or not I really wanted to move to NYC was harder to “prove,” but I answered it by pointing out that I had a 6-month apartment lease, which would be up in 1 month, and that I was going through this process in anticipation of moving.

I also said that moving to NYC would be critical since I was just starting out and had only worked in a regional office before.

Q: That question tends to surprise people, but it will come up if you’re moving to another region like this.

You mentioned they didn’t ask many technical questions, but there was a case study – what was involved and how did you approach it?

A: They told me 2 days in advance that I would receive an LBO model case study where I would build the model from scratch, starting from a blank sheet in Excel.

They sent me excerpts from public filings, research reports, investor presentations, and a 1 page PDF with simple instructions, and gave me around 5 hours to do it (remotely) on Saturday morning and then send it back to them.

It wasn’t that difficult because:

I had already practiced building LBO models from scratch based on other case studies.

I practiced under extreme time pressure so I could learn how to skip unnecessary details.

It’s easy to get hung up on small details that don’t make a big difference in these case studies; I’ve seen people dwell on how to show Depreciation on the Income Statement (some companies show it as a separate line item, some embed it in COGS or OpEx, and some do a mix of both).

That is a big mistake because it doesn’t matter how you show it – you just need to ensure that you’ve reflected the full amount somewhere on the IS and then added it back on the CFS.

So I prepared for those issues in advance and taught myself not to over-think them.

Q: Great, any other interview tips?

A: Honestly, the biggest obstacle for me – and for anyone else moving in from another field, I suspect – is the perception that “you have good experience, but it’s still not investment banking experience.”

That mindset will drag you down in interviews and will make it much harder to sound convincing.

So I did the opposite and acted as if I had worked on real M&A deals in interviews – even though I only contributed to the valuation.

You never want to “apologize for” your experience or indirectly admit that it’s inferior.

It sounds simple, but that shift in mindset and going 180 degrees in the opposite direction made a big difference – if you have to choose, it’s much better to be overconfident in interviews.

Final Thoughts

Q: So we’ve been through most of your story now – any other tips or tricks you want to share that we haven’t already discussed?

Even if I do go into PE, I have no interest in the mega-funds – I would only aim for middle-market and lower middle-market funds so that I can be competitive (the slightly better lifestyle also helps).

About the Author

Brian DeChesare is the Founder of Mergers & Inquisitions and Breaking Into Wall Street. In his spare time, he enjoys memorizing obscure Excel functions, editing resumes, obsessing over TV shows, traveling like a drug dealer, and defeating Sauron.

Comments

I had a corporate banking summer intern in a big bank in NYC where I got pretty good exposure to DCF and Comps (though not as intense as IB). I really received an interview from EY’s TAS Business Modeling team. I know they do most of the cooperate finance work, and build up excel models for their clients (for example what would the entity looks if a client want to spin off for tax purposes?). So I was wondering if you can guide me on how to explain to their why I want to work for this team instead of going back to where I interned or IB?

One of my friend is from Vietnam. He put HSBC Vietnam Office in his resume, although he never worked in there. It helped him to land a job at BB firm. Do you think this is a good idea? Will they find out?

I am currently working in business valuation with a big 4 and interested in moving to investment banking. I would like to know what’s the difference in the pay and hours between middle market banks such as Piper Jaffray and corporate finance division of firms like Deloitte, McKinsey. Is it easy to make a transition from Big 4’s M&A advisory to private equity after 1-2 years.

Thanks for your response Nicole. Can you please answer my first question: 1) What is the difference in the pay and hours between middle market banks such as Piper Jaffray and corporate finance division (M&A advisory) in firms like Deloitte, McKinsey.

Always good to see these interview pieces. I actually wanted to reach see if Brian and team was more interested in my background coming into IB, as I graduated without a job this past December after being let go from a Summer/Fall IB role and was fortunate to get a RE role a month after graduation and lateral into a IB offer four months into that role, being the last hire for the IB’s 2013 FT Analyst Class. I posted here on here about I used cold calling to land my summer/fall IB SA role and referred a lot of students to this site when I recruited for my IB a few weeks ago at my school’s career fair.

I guess this a long winded way of saying my interest in possible doing interview with team and being an advocate for this site for all people who reach out to me when they state an interest in IB.

I currently work at a boutique accounting co in chicago as a valuation analyst. Similar to this guy mentioned. However im interested more in prop trading like futures or options. I understand prop firms like ppl with technical backgrounds. I graduated from a medicore state school with a degree in finance. How can I break into prop trading? I wanna be a millionaire! It seems like prop trading is easier for me to become a millionaire! I also read ur links on prop trading. Please gimme advice…

Thanks! Uh, it’s actually very hard to become a millionaire even in prop trading. If you really want to do trading, you need to practice on your own first, trade your own portfolio, read up on the technical topics, and get a track record to point to first… not as easy to just transition into without some sort of track record first.

Quick question – what are your thoughts on going from a summer internship in a regional office with an IB sell-side M&A bank in Europe to applying for a full time position with a BB in London? Do-able?

Hi M&I,
I have a question about the type of financial modeling and valuation that BB banks do. After going through WSO, there’s a big difference in the skill set learnt at a BB group like Lev fin or M&A compared to a similar group in a MM advisory firm/ bank.
What makes BB modeling so difficult and arcane compared to smaller firms ? Is it the complexity in the various subsidiaries, geography or just that BB’s have much more at stake in the deal. What makes the financial modeling complex ?

It’s a lot of nonsense, to be quite honest. Modeling is based on future assumptions… what guarantee do you have that those future assumptions are accurate?

None!

Complexity does not equal precision.

People at bigger banks spend a lot of time on creating multiple scenarios, creating more granular projections, etc. but ultimately most of it is to stroke the ego of the client and suck up to them to get higher fees.

A simple model is no less accurate than a really complex one, because future assumptions are always inaccurate.

It’s more about building in support for your numbers than anything else. If that support is actually valid, e.g. it comes from real channel checks and discussions, it can be valuable, but often it is not and is based on less-than-solid evidence.

The best way to counter this objection in interviews is to point to examples of more complex models you’ve built or state the points above about complexity vs. precision and how your models helped achieve a tangible result.

Quick question regarding lateral hires: I’m interviewing with two groups at the same bank. Not even sure how the first group got my c.v. in the first place but I decided to go and find it out anyway. Now the second group invited me on a superday. Can I just mention that I’ve interviewed with the other group without making myself look ambiguous? Would it do me any good? I understand laterals might be different from new hires that the career goal needs to be a little more focused, no?

If asked, I would just say that you are also speaking with the other group but that this group is your first choice (as long as that part is true). They could easily ask and find out, so no point in hiding it… but also no point in mentioning it unless they ask specifically.

I would follow-up within a week if you don’t hear back, and sooner than that if it is a very quick process to replace someone… maybe more like 2-3 days.

Agree with Brian totally. Don’t ask don’t tell here, that is regarding other groups at the same bank, only answer the specific questions they ask and don’t volunteer information. Don’t lie as they can easily check your story, but it’s up to them to ask.

Thank all for your replies!I was actually invited back for a third around with senior members of the team. As they mentioned last around was a superday and I did speak with two directors, i was really surprised they would like me to meet more “senior” members. What to expect? Shall I actively contact the people in the group to find out more details (haven’t really done so)?

Great article. I’ve recently gone through a similar transition, so I know this stuff does happen first hand. My situation was a bit different and I had a different approach to the recruiting / interviews, but it certainly happens. In my case, I was in an accounting advisory group at a Big Four firm (not TS / due diligence). I accepted an investment banking offer at an Elite Boutique (think Evercore, Lazard, Greenhill, Moelis) in NYC and similar to the interviewee, I was a non-target school, and masters in accounting grad. Coming in as an associate with other members of the class being ivy MBA-grads showed me that nothing is really impossible. It just requires a lot of strategy and forethought.

For what it’s worth, this site was a huge help to me through the process. So, definitely grateful for the content here and great advice.

The main point is to pretend that you were working on deals the whole time, even if that wasn’t the case. Extend what you did and explain how your work *may have* impacted the deal, even if it did not or it ended without having a huge impact. For example, did your valuation result in something that could have impacted the price an acquirer paid for a company? Even if it did not end up doing that, was there potential for it to happen?

I’ve seen people quit mid-way through the year and go join normal companies or start-ups where there’s no bonus matching. With bonus levels these days, you are really not giving up that much… $20-30K after taxes for many people? Not much in the grand scheme of things if you compare that to 6 months of additional suffering if you really hate the job.

You are correct that they’re more likely to leave if there is some type of bonus matching at the new firm and it’s still a finance firm, but that is not always the case.

I agree on this 100%. When the bonus is not significant, I don’t see a point staying in a depressing and painful place. I’m a good example, leaving from a treasury role for a ECM role in an investment bank, after grueling interviews and assessments.

Had a former room mate leave his fixed income sales job RIGHT before bonus season. Surprised me and others I knew at his (former) firm, but he just couldn’t put up with it anymore. Like metioned above, I doubt these days he was giving up a huge sum.